In July 2013 the concept of "pre-termination negotiations" was introduced (sometimes known as “protected conversations”). This followed case law which narrowed the scope for employer’s to rely on “without prejudice” conversations. This new framework was intended to make it easier for employers to initiate settlement conversations with employees with less risk of those conversations being admissible in subsequent tribunal proceedings. The general framework for pre termination negotiations includes the following:-
·"Pre-termination negotiations" may be protected from admissibility in unfair dismissal proceedings unless there has been "improper behaviour";
·“Improper behaviour” by the employer can include harassment and bullying, for example, but can also include putting undue pressure on the employee in relation to:-
oNot providing the employee with a reasonable time to consider the offer (the ACAS Code suggests at least 10 days should be provided);
oThe employer telling the employee that, if they do not agree to the settlement, they will be dismissed (although a neutral comment that a formal process will be commenced is unlikely to amount to improper behaviour).
The case of Lenlyn UK Ltd v Kular has highlighted an example of how the courts will interpret the meaning of “improper behaviour” and therefore where the protection afforded by “pre-termination negotiations” will not apply.
In this case:-
·The company ran retail foreign exchange bureaus. £1.9 million in cash had disappeared as a result of fraud by a new contractor responsible for cash collection from the various retail outlets across the country. The contractor had gone into administration and so the cash was irrecoverable;
·Mr Kular was the financial controller of the company at the time;
·An external forensic accountant’s report did not find any dishonesty on the part of any employee within the company but highlighted that Mr Kular’s conduct, in failing to monitor the contractor, could be deemed negligent. The report recommended that the company consider whether there was a need for a full disciplinary investigation into Mr Kular’s conduct;
·Instead, the company commenced pre termination negotiations as follows:-
oOn 16 December Mr Kular was called to a meeting with the HR Manager at the end of the working day;
oMr Kular was told:-
§ about the forensic accountant’s report and that it concluded that he had been “grossly negligent”;
§ that the company was considering taking disciplinary action against him but that no decision had been made;
§ that the company wanted to make a “without prejudice” offer to agree an exit and he was given an envelope containing a settlement agreement;
§ to think about the offer and let the HR Manager know by 22 December but, in the meantime, he was not required in work.
·When Mr Kular got home he remembered that he had not set an out of office reply on his emails. When he tried to do that remotely he found that he had been cut off from accessing his employer’s system;
·Mr Kular did not accept the settlement offer and resigned from his employment on 22 December. He claimed constructive dismissal.
The Tribunal agreed that he had been constructively dismissed and agreed that the conversation on 16 December was admissible in evidence due to the employer’s “improper behaviour”. In particular the Tribunal’s view was that Mr Kular had not been given a reasonable time to consider the offer and that the forensic accountant’s report had been misrepresented (particularly when the HR Manager represented that the report concluded he had been grossly negligent when in fact the report only indicated that there needed to be an investigation).
The company appealed and the EAT has subsequently dismissed the appeal.
To ensure that employers are protected by any pre termination negotiations, this case highlights that seemingly simple parts of the negotiation (such as how long an employee has to consider the offer) can render a conversation admissible in evidence in any subsequent proceedings. The guidelines regarding pre termination conversations are likely to be interpreted quite strictly and therefore it is worth employers keeping these guidelines in mind when starting these types of conversations.